All Forum Posts by: Mitch Messer

Hi John,

If you structure the owner financing well enough, you won't want to sell in a year or so!

For example, let's say the seller owns a $100K home free and clear that could rent for $800/mo. Seller doesn't want or need a bunch of cash upfront. You might offer:

• $3K down paid to seller at closing
• $450 paid to seller every month until the $97K balance is paid in full (in just over 20 years)

If accepted, you've just bagged yourself $97K at ZERO (0!) percent financing. That is to say, you'll be paying no interest for this money for the next 20 years. And (once rented) you'll collect $350/mo!

Still, if in 6 months you decide you don't want to hold onto this deal anymore, you could sell the deal with the financing in place to another investor. Who wouldn't want to step into a seasoned, cashflowing rental deal for $5K (or more)? And, as long as the seller continues to get paid each month, everyone's happy!

Hi Jerrell,

The Good News: Wholesaling is alive and well! Simply put, it's "selling bargains to bargain-hunters." This has existed forever and always will: There will always be buyers who need deals and who just don't have the time or energy to build an effective marketing engine.

The Bad News: Wholesaling is not easy! If you don't have a reliable system for finding and developing good seller leads, you're toast (or soon will be).

Many wholesalers got spoiled during the crazy times right after the Crash. When the big hedge funds were spending like drunken sailors on a Saturday night, it was much easier to make money as a wholesaler. Sadly, those days appear to be well behind us.

Now, the deals are harder to find and there are more folks out there chasing them. So, that deal you sign up had better really be a good deal.

But, as long as it is truly a deal, you should have no problem finding a buyer and getting paid. And that's wholesaling.

Hi Jeff,

Like many landlords, we have a Move-Out Checklist that tenants complete and submit before leaving. Obviously, that approach is limited by the integrity of the tenant, so there are a few additional tweaks that we have begun implementing:

• Once a tenant is out, we hire a local contractor with video capability (i.e. a decent smartphone) to perform an Assessment Video that documents the condition of the property and highlights any repairs needed.
• We use the Assessment Video to help determine the work needed to get a property market-ready.
• Once contractors complete their assigned tasks, we require they send "before" and "after" photos showing that the work has been done.

While not perfect, these strategies have greatly reduced the cost and delay in getting our properties back on the market.

@Zachary Phelan Not to beat this drum again, but now that you know the details of this one mortgage, you still need to ensure this is the only debt on the property. Don't skip the title work. Otherwise, you could be one "surprise 2nd" or "unexpected tax lien" away from total disaster. Because once these folks get their $45K, it's theirs and they aren't giving it back...

That said, a private lender or JV partner would be best, since I'm not sure any hard money lenders would lend behind a $120K first. Since the tenant isn't out until October, the fastest exit strategy is a sale to an investor. And that means selling at a wholesale price.

If your comps accurately put FMV at $218K, could you dump it right now for $199K cash? I mean no waiting, no MLS, just find a local investor and give them a great price in exchange for a speedy sale. If so, you and your money partner split the $34K ($199K MINUS $120K loan payoff MINUS $45K payback to money partner), less transaction costs. That's a pretty decent deal!

And, yes, you could instead just hold it until October and try to sell retail for more money, but there are so many additional risks with that approach. I'm a firm believer that "a quick nickel is better than a slow dime!"

Good luck!

Hi Jeff,

I'd be happy to walk you through the wholesaling process. We are very active in Cobb, Gwinnett, Douglas, and Paulding Counties. Shoot me a message with your contact info and let's talk!

@Zachary Phelan 

Since you're planning to purchase subject to (Sub2) the existing financing, I'd only urge you to carefully review their mortgage statement ASAP. The quality and nature of that underlying loan is the key to this deal.

It still doesn't sound like you're getting the whole story. If they've really got nearly $100K in equity, I wonder why they wouldn't just get a home equity line to cover the medical bills?

You need to know about all the liens on the property, so you're definitely going to want to have title pulled. We've had Sub2 deals get days away from closing only to discover a second mortgage the seller "forgot" to mention.

That said, if everything is as it seems, this sounds like a great deal: You'd be buying a home appraised at $218 for $165K ($45K cash + $120K financing)!

Good luck and let us know how it turns out!

Hi Zachary,

I do have some thoughts, but I wanted to clarify three quick items first:

• When you say "Seller put 30k into it," do you mean as a down payment, or as repair expenses? I ask because...
• If they did put $30K down, are you certain about their current loan balance? Unless they made a ton of additional principal payments, it's hard to see how they could go from $169K to $120K in two years. Lastly...
• Does the $837 monthly loan payment include escrow for taxes and insurance?

I probably am missing some key pieces of info, so before going too far, I wanted to make sure I've got the facts straight.

Thanks!

Hi Chirag,

First thing I would do is get that puppy under contract! I've learned the hard way that "you can't steal in slow-motion!"

Then, given your limitations in time and finances, I'd wholesale it. If you are lucky, you'll find a flipper who'll then let you look on once they close. You'd get paid, you'd make a great contact, and you'd get a chance to see the rehab process up close.

As you point out, at this stage the real value is in the learning, not the money. 

Hey Hunter,

Here's my favorite thing to ask myself every day for every real estate deal that I come across (with all credit going to the great Pete Fortunato): What would I have to do to make this deal work for me? In other words, how many ways can I come up with to make into this a great deal?

Do that for every deal you see, and then check your answers with more experienced investors. You'll be amazed how fast you'll get up to speed! 

Hi Neomi,

No need to be skeptical, necessarily. Depends on what they are suggesting and on who controls the deal. 

When we propose a co-wholesaling arrangement, we typically (as the primary wholesaler) have a contract with the seller. We'll work with another wholesaler (the secondary) who brings us a buyer. If the deal gets done, we'll split the wholesale fee (often 50/50) and everyone is happy. We're in control, so we can ensure things go as expected. 

The problems can arise when you are the secondary and the primary gets greedy and shortsighted and tries to stiff you on the fee. Without the direct relationship with the seller, you're at the mercy of the primary. 

So, if your primary is reputable and other wholesalers can vouch for them honoring the co-wholesaling agreement, you should be fine. If not, I'd pass.

Good luck!